For a retailer with inventory to sell,the acid-test ratio will be
A) less than the current ratio, thus providing a more stringent measure of liquidity.
B) greater than the current ratio, thus providing a more stringent measure of liquidity.
C) greater than the current ratio, thus providing a less stringent measure of liquidity.
D) unimportant because it doesn't include inventory.

Question

Quizplus · Accepted Answer

The acid-test ratio, also known as the quick ratio, excludes inventory from the calculation, providing a more rigorous measure of liquidity for retailers with inventory to sell. As a result, the acid-test ratio will typically be lower than the current ratio, which includes inventory.

For a Retailer with Inventory to Sell,the Acid-Test Ratio Will